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The Prime Minister went on: ''It goes without saying that any treaty, even one that just applied to the euro area, needs unanimous agreement of all 27 EU states including the UK, which of course has a veto.

''I think these are very important points to understand.''

Mr Cameron stressed he wanted a ''successful'' euro area that was ''able to deliver growth and stability''.

The leaders were speaking as the German parliament narrowly approved the country's part of a 750 billion euro package of loan guarantees for Greece, designed to stabilise the currency.

Uncertainty over whether the deal would be passed had contributed to sharp falls on stock markets around the world.

Asked whether she would be pushing for a new treaty, Mrs Merkel said: "It has been very important to us that in connection with the situation in Greece that the EU is putting in together a cooperation that focuses on stability of the euro.

"There are a lot of things to discuss about this. The coalition has made some suggestions. We also have some ideas of how contracts can be formulated. But I want to make clear we are at the start of this and even in the eurozone there is no unity on exactly what we should be doing.

"I've made it clear that we need to stabilise the euro but at a later stage we will be able to say what we can do and how should we do it.

"And then we will see what the majority will want and the interests of the eurozone."

Asked to comment on Germany's unilateral ban on naked short-selling of euro bonds, Mr Cameron said: "Obviously we should respect each other's decisions on these issues."

He pointed out that any such decision in Britain would be a matter for the Financial Services Authority (FSA).

"All I would say is this, and I'm sure there would be agreement on this, what matters is are we dealing with the real causes rather than just the symptoms?

"It seems to me that the cause of many of our problems in the European economies is excessive debt, excessive deficits, financial systems that haven't worked, banking systems that have ground our economies down.

"Those are the problems, we've got to tackle the problems and get to the source of the problems and then actually we'll find the symptoms will be less of a problem."

Mr Cameron confirmed the pair had discussed the potential regulation of hedge funds and talks were continuing.

He said: "We do have our concerns because we don't think actually hedge funds were the cause of the problems in our financial markets and in our economies.

"We accept the need for regulation but it does need to be fair and proportionate.

"We have a particular issue about hedge funds that are based in other countries but have operations within one EU country and whether they would be able to access the so-called passporting system.

"So we have concerns, it's still being discussed."

Mr Cameron also warned that the EU budget should not be "immune" from cuts that were being imposed by governments in member states.